The bills are piling up, and you’re unsure of where to turn. You begin to consider your options, and the question of bankruptcy surfaces. After some brief research you begin to wonder how exactly bankruptcy works.
The question, “If I file, what happens to my debt?” is a common one. You might find words like “Equity” and “Chapter 7 Bankruptcy”, but you don’t know how these may pertain to your case. Groce & DeArmon, P.C., explains the power of equity and how it is used in Chapter 7 bankruptcy in today’s blog.
What Is Equity?
Equity represents the numbered value that will be returned to shareholders once all assets are liquidated in the process of filing for bankruptcy. Equity is typically assessed using the amount owed on your debted assets and valuing it against how much those assets are worth.
Let’s look at a mortgage as an example. If you have $100,000 listed as your currently owed balance for your mortgage, but your house is valued at $150,000, then your equity in your house is $50,000.
There are two types of assets involved with bankruptcy:
- Non-Exempt Assets. All of the property that cannot be protected by an exemption. This is property that homeowners are required to turn over to the Chapter 7 bankruptcy trustee. The trustee sells these assets to pay the creditors the homeowners owe money to. In return, the homeowner receives a discharge of all debt that is considered eligible for discharge.
- Exempt Assets. Assets that can be protected from bankruptcy. They vary by state. Missouri has several exemptions listed here.
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How Equity Affects Chapter 7 Bankruptcy
Equity is considered an asset in chapter 7 bankruptcy. Returning to our mortgage example, creditors can use your mortgage equity of $50,000 to pay back the creditors you owe debt to through the avenue of a home equity loan.
This can be a tricky path to walk because if you do not consistently make the payments on your home equity loan you will lose your home. You could also lose your home regardless of how much equity you have because the eligibility to use equity is dependent on the amount of equity state law allows you to use to exempt your home.
In the state of Missouri, the maximum amount of exemption for a property is $15,000. It’s also limited to the dwelling and land on which you currently live. For more information on your personal eligibility to file for Chapter 7 bankruptcy, and whether you qualify to keep your home, contact Groce & DeArmon, P.C.
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Questions On Whether You Qualify for Chapter 7 Bankruptcy? Ask Groce & DeArmon, P.C.
Wondering if you can file for Chapter 7 bankruptcy? Need some compassionate and professional legal advice? Contact us today. We can discuss your options and help you determine the best course of action for your individual situation. Our first consultation is always free. Contact Groce & DeArmon, P.C. or call toll-free 1-800-640-3706 in Missouri or (417) 862-3706.
